About 4,000 BTC, worth approximately $320 million, left Liquid’s federation wallet on Sunday, draining it from roughly 4,200 BTC to about 200 BTC. The funds moved through SideSwap’s peg-out authorization key, which neither SideSwap nor the federation claim was compromised, pointing instead to a bug in Elements, Liquid’s underlying software. The parties left an on-chain message indicating they would return the funds after the vulnerability was patched, and Blockstream confirmed acceptance of that condition in a PGP-signed message. Liquid’s sidechain remains suspended since the incident, while other assets on the network, including USDT and tokenized real-world assets, as well as Bitcoin’s own network, were unaffected.
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